The Innovate to Save fund, which was launched by Welsh finance secretary Mark Drakeford, will allow eligible organisations to apply for both loans and non-repayable funding from the government.
The non-repayable funding will be used to help organsiations develop, prototype and test ways of changing service delivery. Those applying for the fund will also get support and resources from Cardiff University and Nesta.
Commenting on the launch, Drakeford said reduced budgets mean change is “a necessity not a choice”.
“More scarce resources and growing demand means all public services must think and work differently, if we are to continue to provide the level of services people need,” he said.
He added that he hopes to see a wide range of different projects being developed across Wales.
“The savings generated will not only be re-invested in services but will improve outcomes for people and will be able to be rolled out more widely,” he said.
The fund will be run alongside the Invest to Save fund, which launched back in 2009 and has so far supported 160 projects.
Helen Goulden, executive director of InnovationLab at Nesta, said the motivation to “rethink and reshape” the way governments engage with citizens and deliver services to the public is “riding high”.
“Our partnership with the Welsh government is ambitious, seeking to tackle some of the most complex issues currently facing our public services – and generate cashable savings,” she said and added that over the next two years, the fund will “provide the evidence to justify its replication in many other areas”.